Google Announces New Parent Company Called 'Alphabet'

Transcript

ROBERT SIEGEL, HOST:

Google is restructuring. In a blog post today, CEO Larry Page announced a new firm called Alphabet. Alphabet will become the parent company atop all of Google's many ventures. NPR tech reporter Aarti Shahani joins us now to explain. Hi, Aarti.

AARTI SHAHANI, BYLINE: Hi.

SIEGEL: And first, why is Google making this change?

SHAHANI: Well, it sounds like Google's founders want to be agile, not just a big comfortable bureaucracy with free food. So the idea is, let's break up the company into different parts, put a CEO in charge of each part and encourage lots of competition. Keep people on their toes - that way, no free riders. In a blog post, Google founder Larry Page says he'll be the new CEO of Alphabet, and his co-founder, Sergey Brin, will be president. The business that clearly makes money based on Internet search will be a new, slimmed-down Google. And then outside of it, it's a big playpen for speculative projects, stuff Page calls pretty far afield. And Google has plenty of those, like contact lenses that read glucose levels, self-driving cars, delivery by drones.

SIEGEL: And what's the significance of the name Alphabet?

SHAHANI: Well, Google made its initial big bang by reading the alphabet - figuring out how to index words and search for them and making tons of money on that on desktops and, later on, smart phones. And also, you know, Alphabet is a nice compound word - bet, which we know, and alpha means a return on investment above benchmark, which is what every investor wants.

In terms of structure, it sounds kind of like Google's founders are trying to replicate Berkshire Hathaway. It's the umbrella for a bunch of businesses. Warren Buffett and Charlie Munger are the capital allocators. And if you've got tons of capital and you want to stay busy, your job becomes to place bets. So by focusing on that, you know, maybe Larry and Sergey are more likely to bet on the next Google, whatever letter of the alphabet it starts with.

SIEGEL: Well, before getting to the next Google, the Google that now exists but will be somewhat slimmed-down under the umbrella of Alphabet - who's going to run that?

SHAHANI: Well, the new CEO will be a guy named Sundar Pichai. He's a really well-known figure for people who follow - he's a very well-known figure for people who follow mobile around the world. Pichai was a middle manager who made his mark by improving the Google toolbar, of all things. And towards the end of last year, he was mega-promoted, reporting directly to Larry Page. And he took control of Android, which is very important for Google's global expansion.

SIEGEL: So Google stock will disappear? People will buy shares in Alphabet once this change is put into effect?

SHAHANI: No, no. The stock converts over. It doesn't just disappear. And so you become the owner of Alphabet stock instead of Google stock.

SIEGEL: And does this have any implications for, say, Google's self-driving car projects, something pretty far away from Internet search?

SHAHANI: Yeah. You know, I think that the founders are hoping that it has implications, right? Like, right now, when you look at Google from the outside, you know, and possibly from the inside, the company just has a whole lot going on. People who work at Google, you know, often say that they don't really get what's happening next-door or, you know, one corridor over. There are many, many corridors.

And so I think the idea is that, you know, for example, with self-driving cars, when we really focus on it as a separate business and we constantly scrutinize it as a separate business, you know, we hold the leaders of it to the fire far more than we currently do. And so, you know, maybe the hope is that by restructuring and making separate CEOs at the head of each project, you really put fire under people to produce and return things that aren't just quirky, but that, you know, have financial results.